Charlie9

The National Association of Realtors' Fuzzy Math

There's an industry standard way of calculating a rate of return on an investment with cash flows, it's called internal rate of return (IRR). Essentially, you would have the same ending amount as if you put the money in a saving account that yielded the IRR.

In the example, your inital deposit would be the amount paid at purchase closing (down payment, escows, comissions, etc...). Monthly mortgage payments would be the same as monthly deposits in the savings account. The ending amount would be whatever check was received after the selling closing. I guess you could justify amounts saved in rent as the equivalent of a withdrawal from the account.

I used to write software that calculated returns on these kind of investments that was used by many major banks and investment houses and this was the generally accepted compliant way to determine the rate of return. I used to get in arguments with the accountants about the numbers being wrong and I had to convince them that this was how it was done and that the numbers were in fact correct.